Thirteen years after pumping in cash to rescue Bank of Ireland, the government has finally exited the country’s largest lender, the first of the three institutions bailed out during the financial crisis to return to private hands.
BoI hailed the move as a “milestone” and Paschal Donohoe, the finance minister, said it freed up taxpayers’ cash for “more productive purposes”.
“The gradual disposal of the state’s investment in Bank of Ireland into a rising market has been successful in delivering on this objective for our citizens,” he said in a statement.
The government invested €4.7bn in BoI between 2009 and 2011 in a sector-wide crisis sparked by a reckless mortgage lending spree that ended up crashing the entire Irish economy.
The government had now recovered almost €6.7bn, the ministry said, with the price for its phased disposals rising to an average of €6.17 per share from an initial €4.96. The bank was trading down 0.5 per cent at €7.39 a share by lunchtime on Friday.
“The completion of the sale of the state shareholding in Bank of Ireland is a very positive moment for Irish taxpayers, for Bank of Ireland, and for the sector as a whole,” said Gavin Kelly, interim group chief executive.
“This is a milestone moment for Bank of Ireland as we move conclusively beyond the financial crisis, and is a very important step towards full normalisation of our relationship with the state,” he added.
The government exit was expected to trigger renewed calls from the lender for an executive pay cap and employee bonus ban imposed after the crisis to be quashed, one senior official at the bank said. Bankers have long argued the measurers crimp their ability to attract and retain talent
Francesca McDonagh, who stepped down as chief executive and moved last month to Credit Suisse, has been vocal in calling for the legislation to be changed. But the other two banks that still count the government as an investor — Allied Irish Banks and Permanent TSB — would take a dim view of BoI being exempted if they were not, despite them remaining majority state-owned.
AIB, Ireland’s second-biggest bank, is still 63.5 per cent state-owned. PTSB is 75 per cent state-owned, but that will fall to 62.4 per cent later this year when the lender issues new shares in part exchange for Ulster Bank assets it is buying from NatWest Group Plc.
Ulster Bank and KBC are in the process of exiting the Irish market — a shake-up hailed by the sector as a “once in a generation” growth opportunity. Donohoe said the state’s stakes in PTSB and AIB were together still worth more than €4.9bn.
Despite its return to private hands, BoI has one piece of unfinished business: it is the only one of the three big lenders yet to be fined for its part in a tracker mortgage scandal. The bank is expected to receive a hefty penalty.